Understanding the transition between proliferation and differentiation has important implications for many fields, including for stem cell-based therapies for retinal degeneration. During retinal development in both Drosophila and vertebrates the transition from proliferating precursors to differentiating neurons occurs in a wave that propagates across retinal precursor tissue and is controlled by interconnections between Hedgehog (Hh) and other signaling pathways. Wave propagation is linked to expression of Atonal (Ato)-related proneural factors, which are necessary for neural development. We have identified a novel gene, abnormally blistered and misshapen eyes (abams), that is required to coordinate wave propagation and link it to neural differentiation in the Drosophila eye. Surprisingly, neural differentiation occurs in the absence of R8 when abams function is reduced, albeit in a disorganized fashion. This phenotype is unlike any that has been observed previously, and suggests a significant gap in our knowledge of how the signaling pathways that control wave propagation are coordinated and linked to neural differentiation. The abams gene encodes a predicted member of the neprilysin family of type II transmembrane metalloendopeptidases. In vertebrates neprilysins cleave signaling peptides that e.g. regulate blood pressure and have been linked to A? metabolism in the context of age related macular degeneration, but little is known about their functions in regulating developmental signals. Interestingly, Abams lacks residues critical for metallopeptidase catalytic acitivity. Some mammalian neprilysins (e.g. PHEX) bind to substrates and prevent degradation by other peptidases. Based on our preliminary evidence, we hypothesize that Abams binds to and prevents cleavage of a signaling factor that coordinates wave propagation and links it to neural differentiation during retinal development. The long-term global aim of this work is to understand the mechanisms by which the transition between proliferation and differentiation occurs in the context of retinal development. The object of this application is to identify which signaling facto or factors is targeted by Abams. To accomplish these goals we will (1) determine in which cells Abams acts as well as its localization in cells; (2) determine the effect of Abams on signaling pathways important for wave propagation and (3) Determine what proteins Abams interacts with. The experiments proposed here are expected to lead to identification of the signaling pathway component targeted by Abams and how neprilysins function in the eye. If successful, this work will enable future experiments into the nature of how signaling pathways control neuronal differentiation, and into the role of Abams and potentially other neprilysins in eye development and function.